FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark one)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007


¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________

Commission File Number: 333-20277

PHL VARIABLE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)


Connecticut	06-1045829
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

One American Row, Hartford, Connecticut	06102-5056
(Address of principal executive offices)	(Zip Code)

(860) 403-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨ NO þ

PHL Variable Insurance Company is a wholly-owned indirect subsidiary of The Phoenix Companies, Inc., and there is no market for the registrant’s common stock. As of August 8, 2007, there were 500 shares of the registrant’s common stock outstanding.

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format permitted by that General Instruction.

TABLE OF CONTENTS


	Item No.	Description	Page

PART I		FINANCIAL INFORMATION

	1	Financial Statements:

		Unaudited Interim Condensed Balance Sheet as of June 30, 2007 and December 31, 2006	3

		Unaudited Interim Condensed Statement of Income and Comprehensive Income and Changes in Stockholder’s Equity for the three and six months ended June 30, 2007 and 2006	4

		Unaudited Interim Condensed Statement of Cash Flows for the three and six months ended June 30, 2007 and 2006	5

		Notes to Unaudited Interim Condensed Financial Statements for the three and six months ended June 30, 2007 and 2006	6

	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

	3	Quantitative and Qualitative Disclosures About Market Risk	21

	4	Controls and Procedures	21

PART II		OTHER INFORMATION

	1	Legal Proceedings	23

	1A	Risk Factors	23

	2	Unregistered Sales of Equity Securities and Use of Proceeds	23

	3	Defaults Upon Senior Securities	23

	4	Submission of Matters to a Vote of Security Holders	23

	5	Other Information	23

	6	Exhibits	24

Signature			25

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PHL VARIABLE INSURANCE COMPANY

Unaudited Interim Condensed Balance Sheet

($ in thousands, except share data)

June 30, 2007 (unaudited) and December 31, 2006


	June 30,		Dec 31,
	2007		2006

ASSETS:
Available-for-sale debt securities, at fair value	$	1,826,355	$	2,050,989
Policy loans, at unpaid principal balances		18,215		15,542
Other investments		1,991		1,612
Total investments		1,846,561		2,068,143
Cash and cash equivalents		64,455		47,127
Accrued investment income		16,332		19,882
Receivables		51,520		54,534
Deferred policy acquisition costs		793,014		703,794
Receivable from related parties		1,549		300
Other assets		3,312		2,356
Separate account assets		3,236,506		2,953,063
Total assets	$	6,013,249	$	5,849,199

LIABILITIES:
Policyholder deposit funds	$	1,261,887	$	1,491,367
Policy liabilities and accruals		771,855		706,198
Deferred income taxes		109,522		96,654
Payable to related parties		18,494		25,081
Other liabilities		34,212		26,576
Separate account liabilities		3,236,506		2,953,063
Total liabilities		5,432,476		5,298,939

CONTINGENT LIABILITIES (Note 7)

STOCKHOLDER’S EQUITY:
Common stock, $5,000 par value: 1,000 shares authorized; 500 shares issued		2,500		2,500
Additional paid-in capital		528,234		503,234
Retained earnings		56,999		47,215
Accumulated other comprehensive loss		(6,960)		(2,689)
Total stockholder’s equity		580,773		550,260
Total liabilities and stockholder’s equity	$	6,013,249	$	5,849,199

The accompanying notes are an integral part of these financial statements.

PHL VARIABLE INSURANCE COMPANY

Unaudited Interim Condensed Statement of Income and Comprehensive Income

and Changes in Stockholder’s Equity

($ in thousands)

Three and Six Months Ended June 30, 2007 and 2006


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
REVENUES:
Premiums	$	2,882	$	3,219	$	6,061	$	5,694
Insurance and investment product fees		59,562		41,841		113,863		83,836
Net investment income		27,192		33,906		55,086		68,966
Net realized investment gains (losses)		359		(64)		189		(4,147)
Total revenues		89,995		78,902		175,199		154,349

BENEFITS AND EXPENSES:
Policy benefits		32,555		36,640		68,231		80,488
Policy acquisition cost amortization		28,243		20,767		53,506		33,824
Other operating expenses		20,423		16,263		37,509		35,775
Total benefits and expenses		81,221		73,670		159,246		150,087
Income before income taxes		8,774		5,232		15,953		4,262
Applicable income tax expense		(2,829)		(1,329)		(5,169)		(1,101)
Net income	$	5,945	$	3,903	$	10,784	$	3,161

COMPREHENSIVE INCOME:
Net income	$	5,945	$	3,903	$	10,784	$	3,161
Net unrealized investment losses		(5,206)		(4,812)		(4,271)		(9,128)
Net unrealized derivative losses		—		(65)		—		(148)
Other comprehensive loss		(5,206)		(4,877)		(4,271)		(9,276)
Comprehensive income (loss)	$	739	$	(974)	$	6,513	$	(6,115)

ADDITIONAL PAID-IN CAPITAL:
Capital contributions from parent	$	25,000	$	—	$	25,000	$	—

RETAINED EARNINGS:
Net income		5,945		3,903		10,784		3,161
Adjustment for initial application of FIN 48 (Note 2)		—		—		(1,000)		—

OTHER COMPREHENSIVE INCOME:
Other comprehensive loss		(5,206)		(4,877)		(4,271)		(9,276)
Change in stockholder’s equity		25,739		(974)		30,513		(6,115)
Stockholder’s equity, beginning of period		555,034		537,122		550,260		542,263
Stockholder’s equity, end of period	$	580,773	$	536,148	$	580,773	$	536,148

The accompanying notes are an integral part of these financial statements.

PHL VARIABLE INSURANCE COMPANY

Unaudited Interim Condensed Statement of Cash Flows

($ in thousands)

Six Months Ended June 30, 2007 and 2006


	Six Months Ended
	June 30,
	2007		2006
OPERATING ACTIVITIES:
Net income	$	10,784	$	3,161
Net realized investment (gains) losses		(189)		4,147
Investment income		3,417		2,869
Deferred income taxes		15,167		15,129
Increase in receivables		(2,482)		(7,009)
Increase in deferred policy acquisition costs		(80,894)		(97,825)
Increase in policy liabilities and accruals		66,567		124,807
Other assets and other liabilities net change		(5,122)		(16,517)
Cash from operating activities		7,248		28,762

INVESTING ACTIVITIES:
Investment purchases		(502,550)		(471,246)
Investment sales, repayments and maturities		715,629		987,194
Cash from investing activities		213,079		515,948

FINANCING ACTIVITIES:
Policyholder deposit fund deposits		133,597		106,566
Policyholder deposit fund withdrawals		(361,596)		(663,120)
Capital contributions from parent		25,000		—
Cash for financing activities		(202,999)		(556,554)
Change in cash and cash equivalents		17,328		(11,844)
Cash and cash equivalents, beginning of period		47,127		25,818
Cash and cash equivalents, end of period	$	64,455	$	13,974

The accompanying notes are an integral part of these financial statements.

PHL VARIABLE INSURANCE COMPANY

Notes to Unaudited Interim Condensed Financial Statements

Three and Six Months Ended June 30, 2007 and 2006

Organization and Operations

PHL Variable Insurance Company is a life insurance company offering individual life insurance and annuity products including universal life, variable universal life, term life and variable annuities. It is a wholly-owned subsidiary of PM Holdings, Inc. PM Holdings is a wholly-owned subsidiary of Phoenix Life Insurance Company (Phoenix Life), which is a wholly-owned subsidiary of The Phoenix Companies, Inc., a New York Stock Exchange listed company.

Basis of Presentation and Significant Accounting Policies

We have prepared these financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, which differ materially from the accounting practices prescribed by various insurance regulatory authorities. We have reclassified certain amounts for 2006 to conform with 2007 presentation.

Use of estimates

In preparing these financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. We employ significant estimates and assumptions in the determination of deferred policy acquisition costs; policyholder liabilities and accruals; the valuation of investments in debt securities; and accruals for deferred taxes and contingent liabilities. Our significant accounting policies are presented in the notes to our financial statements in our 2006 Annual Report on Form 10-K.

Our interim financial statements do not include all of the disclosures required by GAAP for annual financial statements. In our opinion, we have included all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the results for the interim periods. Financial results for the three and six-month periods in 2007 are not necessarily indicative of the results that may be expected for the year 2007. These unaudited financial statements should be read in conjunction with our financial statements in our 2006 Annual Report on Form 10-K.

Adoption of new accounting standards

The Company adopted the provisions of the Financial Accounting Standards Board, or FASB, Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48, on January 1, 2007. As a result of the implementation of FIN 48, we recognized a cumulative effect adjustment of approximately $1,000 thousand increase in reserves for uncertain tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. Including the cumulative effect adjustment, we had $1,840 thousand of total gross unrecognized tax benefits as of January 1, 2007. The entire amount of unrecognized tax benefits would, if recognized, impact the annual effective tax rate upon recognition. There were no material changes in unrecognized tax benefits for the six months ended June 30, 2007.

It is reasonably possible that any changes within the next twelve months to the uncertain tax positions recorded as of June 30, 2007 will not result in a material change to our results of operations, financial condition or liquidity. We do not anticipate that there will be additional payments made or refunds received within the next twelve months with respect to the years under audit. We do not anticipate any increases to the unrecognized tax benefits that would have a significant impact on the financial position of the Company.

We recognize interest and penalties related to amounts accrued on uncertain tax positions and amounts paid or refunded from federal and state income tax authorities in tax expense. The interest and penalties recorded during the three and six-month periods ending June 30, 2007 and 2006 did not have a material impact on the effective tax rate those periods. We did not have an accrual for the payment of interest and penalties as of January 1, 2007.

In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, or SAB 108. SAB 108 provides guidance for how errors should be evaluated to assess materiality from a quantitative perspective. SAB 108 permits companies to initially apply its provisions by either restating prior financial statements or recording the cumulative effect of initially applying the approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings. We adopted SAB 108 on December 31, 2006 with no effect to the financial statements.

In March 2006, the FASB issued SFAS 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, or SFAS 156. SFAS 156 provides guidance on recognition and disclosure of servicing assets and liabilities and is effective beginning January 1, 2007. We adopted this standard effective January 1, 2007 with no material impact on our financial position and results of operations.

Effective January 1, 2006, we adopted SFAS 155, Accounting for Certain Hybrid Financial Instruments, or SFAS 155. SFAS 155 resolves certain issues surrounding the accounting for beneficial interests in securitized financial assets. Our adoption of SFAS 155 did not have a material effect on our financial statements.

Effective January 1, 2006, we adopted FASB Staff Position Nos. SFAS 115-1 and SFAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, or FSP 115-1. FSP 115-1 provides guidance as to the determination of other-than-temporarily impaired securities and requires certain financial disclosures with respect to unrealized losses. These accounting and disclosure requirements largely codify our existing practices as to other-than-temporarily impaired securities and thus, our adoption did not have a material effect on our consolidated financial statements.

In September 2005, the Accounting Standards Executive Committee, or AcSEC, of the AICPA issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts, or SOP 05-1. SOP 05-1 provides guidance on accounting by insurance enterprises for deferred policy acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in Statement of Financial Accounting Standards No. 97, or SFAS No. 97. The SOP defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. This SOP is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. We adopted this standard effective January 1, 2007 with no material effect on our financial position and results of operations.

Accounting standards not yet adopted

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, or SFAS 159. SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007, and early adoption is permitted provided the entity also elects to apply the provisions of SFAS No. 157, Fair Value Measurements, at the same time. We are currently assessing the impact of SFAS 159 on our financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, or SFAS 157. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 provides guidance on how to measure fair value when required under existing accounting standards. The statement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (“Level 1, 2 and 3”). Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets that we have the ability to access at the measurement date. Level 2 inputs are observable inputs, other than quoted prices included in Level 1, for the asset or liability. Level 3 inputs are unobservable inputs reflecting our estimates of the assumptions that

market participants would use in pricing the asset or liability (including assumptions about risk). Quantitative and qualitative disclosures will focus on the inputs used to measure fair value for both recurring and non-recurring fair value measurements and the effects of the measurements in the financial statements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, with earlier application encouraged only in the initial quarter of an entity’s fiscal year. We are currently assessing the impact of SFAS 157 on our financial position and results of operations. Adoption of this statement is expected to have an impact on our financial statements; however, the impact has not yet been determined.

Deferred Policy Acquisition Costs


Deferred Policy Acquisition Costs:	Three Months Ended				Six Months Ended
($ in thousands)	June 30,				June 30,
	2007		2006		2007		2006

Policy acquisition costs deferred	$	72,982	$	47,984	$	134,400	$	131,648
Costs amortized to expenses:
Recurring costs		(27,983)		(20,600)		(52,682)		(35,935)
Realized investment (gains) losses		(260)		(167)		(824)		2,111
Offsets to net unrealized investment losses included in other comprehensive income		12,676		10,568		8,326		21,126
Change in deferred policy acquisition costs		57,415		37,785		89,220		118,950
Deferred policy acquisition costs, beginning of period		735,599		610,480		703,794		529,315
Deferred policy acquisition costs, end of period	$	793,014	$	648,265	$	793,014	$	648,265

Investing Activities

Debt securities


Fair Value and Cost of Debt Securities:	June 30, 2007				December 31, 2006
($ in thousands)	Fair Value		Cost		Fair Value		Cost

U.S. government and agency	$	77,353	$	77,874	$	92,579	$	93,425
State and political subdivision		11,860		12,162		15,900		16,281
Foreign government		29,961		27,684		49,884		46,505
Corporate		1,018,367		1,040,226		1,157,781		1,172,275
Mortgage-backed		391,284		398,445		452,641		455,739
Other asset-backed		297,530		297,982		282,204		280,086
Available-for-sale debt securities	$	1,826,355	$	1,854,373	$	2,050,989	$	2,064,311


Gross and Net Unrealized Gains and Losses from	June 30, 2007				December 31, 2006
Debt Securities:	Gains		Losses		Gains		Losses
($ in thousands)

U.S. government and agency	$	262	$	(783)	$	295	$	(1,141)
State and political subdivision		13		(315)		17		(398)
Foreign government		2,476		(199)		3,590		(211)
Corporate		3,513		(25,372)		6,523		(21,017)
Mortgage-backed		1,724		(8,885)		2,862		(5,960)
Other asset-backed		2,548		(3,000)		3,857		(1,739)
Debt securities gains (losses)	$	10,536	$	(38,554)	$	17,144	$	(30,466)
Debt securities net losses			$	(28,018)			$	(13,322)


Aging of Temporarily Impaired	June 30, 2007
Debt Securities:	Less than 12 months				Greater than 12 months				Total
($ in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt securities
U.S. government and agency	$	8,141	$	(41)	$	39,195	$	(742)	$	47,336	$	(783)
State and political subdivision		—		—		11,345		(315)		11,345		(315)
Foreign government		—		—		6,317		(199)		6,317		(199)
Corporate		204,845		(3,076)		617,249		(22,296)		822,094		(25,372)
Mortgage-backed		125,189		(3,093)		214,581		(5,792)		339,770		(8,885)
Other asset-backed		88,827		(1,230)		80,274		(1,770)		169,101		(3,000)
Total temporarily impaired securities	$	427,002	$	(7,440)	$	968,961	$	(31,114)	$	1,395,963	$	(38,554)

Below investment grade	$	23,406	$	(239)	$	69,169	$	(4,566)	$	92,575	$	(4,805)
Below investment grade after offsets for deferred policy acquisition cost adjustment and taxes			$	(37)			$	(772)			$	(809)

Number of securities				240				522				762

These securities are considered to be temporarily impaired at June 30, 2007 as each of these securities has performed, and is expected to continue to perform, in accordance with their original contractual terms, and we have the ability and intent to hold these securities until they recover their value.

There were no unrealized losses of below investment grade debt securities with a fair value less than 80% of the securities amortized cost at June 30, 2007.


Aging of Temporarily Impaired	As of December 31, 2006
Debt Securities:	Less than 12 months				Greater than 12 months				Total
($ in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt Securities
U.S. government and agency	$	5,643	$	(19)	$	50,878	$	(1,122)	$	56,521	$	(1,141)
State and political subdivision		1,014		(3)		14,367		(395)		15,381		(398)
Foreign government		4,024		(10)		9,323		(201)		13,347		(211)
Corporate		152,344		(1,595)		689,660		(19,422)		842,004		(21,017)
Mortgage-backed		78,465		(693)		257,905		(5,267)		336,370		(5,960)
Other asset-backed		53,844		(171)		102,302		(1,568)		156,146		(1,739)
Total temporarily impaired securities	$	295,334	$	(2,491)	$	1,124,435	$	(27,975)	$	1,419,769	$	(30,466)

Below investment grade	$	20,190	$	(377)	$	90,763	$	(3,859)	$	110,953	$	(4,236)
Below investment grade after offsets for deferred acquisition cost adjustment and taxes			$	(45)			$	(550)			$	(595)

Number of securities				162				544				706

The securities are considered to be temporarily impaired at December 31, 2006 as each of these securities has performed, and is expected to continue to perform, in accordance with their original contractual terms, and we have the ability and intent to hold these securities until they recover their value.

There were no unrealized losses of below investment grade debt securities with a fair value less than 80% of the securities amortized cost at December 31, 2006.

Net investment income


Sources of Net Investment Income:	Three Months Ended				Six Months Ended
($ in thousands)	June 30,				June 30,
	2007		2006		2007		2006

Debt securities	$	26,389	$	33,830	$	53,398	$	68,704
Policy loans		(65)		47		190		134
Other investments		108		(27)		118		39
Other income		3		—		218		—
Cash and cash equivalents		1,415		514		2,337		1,093
Total investment income		27,850		34,364		56,261		69,970
Investment expenses		(658)		(458)		(1,175)		(1,004)
Net investment income	$	27,192	$	33,906	$	55,086	$	68,966

Net realized investment gains (losses)


Sources and Types of Net Realized Investment	Three Months Ended				Six Months Ended
Gains (Losses):	June 30,				June 30,
($ in thousands)	2007		2006		2007		2006

Debt security impairments	$	—	$	—	$	(500)	$	(411)
Debt security transaction gains		119		1,053		988		2,263
Debt security transaction losses		(457)		(1,494)		(1,888)		(6,561)
Other investments transaction gains		697		377		1,589		562
Net transaction gains (losses)		359		(64)		689		(3,736)
Net realized investment gains (losses)	$	359	$	(64)	$	189	$	(4,147)

Unrealized investment gains (losses)


Sources of Changes in Net Unrealized Investment	Three Months Ended				Six Months Ended
Gains (Losses):	June 30,				June 30,
($ in thousands)	2007		2006		2007		2006

Debt securities	$	(20,421)	$	(17,885)	$	(14,695)	$	(34,927)
Other		(263)		(89)		(201)		(243)
Net unrealized investment losses	$	(20,684)	$	(17,974)	$	(14,896)	$	(35,170)

Net unrealized investment losses	$	(20,684)	$	(17,974)	$	(14,896)	$	(35,170)
Applicable deferred policy acquisition cost benefit		(12,675)		(10,568)		(8,326)		(21,127)
Applicable deferred income tax expense		(2,803)		(2,594)		(2,299)		(4,915)
Offsets to net unrealized investment losses		(15,478)		(13,162)		(10,625)		(26,042)
Net unrealized investment losses included in other comprehensive income	$	(5,206)	$	(4,812)	$	(4,271)	$	(9,128)

Separate Accounts, Death Benefits and Other Insurance Benefit Features

Separate account products are those for which a separate investment and liability account is maintained on behalf of the policyholder. Investment objectives for these separate accounts vary by fund account type, as outlined in the applicable fund prospectus or separate account plan of operations. Our separate account products include variable annuities and variable life insurance contracts. The assets supporting these contracts are carried at fair value and reported as separate account assets with an equivalent amount reported as separate account liabilities. Amounts assessed against the policyholder for mortality, administration, and other services are included within revenue in Insurance and investment product fees. During the three and six-month periods ended June 30, 2007 and 2006, there were no gains or losses on transfers of assets from the general account to a separate account.

Many of our variable contracts offer various guaranteed minimum death, accumulation, withdrawal and income benefits. These benefits are offered in various forms as described in the footnotes to the table below. We currently reinsure a significant portion of the death benefit guarantees associated with our in-force block of business. We establish policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity policies as follows:


·		Liabilities associated with the guaranteed minimum death benefit, or GMDB, are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used in estimating the liabilities are generally consistent with those used for amortizing deferred policy acquisition costs.
·		Liabilities associated with the guaranteed minimum income benefit, or GMIB, are determined by estimating the expected value of the income benefits in excess of the projected account balance at the date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating such guaranteed income benefit liabilities are generally consistent with those used for calculating the guaranteed death benefit liabilities.

For annuities with GMDB, 500 stochastically generated scenarios were used. For annuities with GMIB, we used 1,000 stochastically generated scenarios.


Separate Account Investments of Account Balances of Contracts with Guarantees:	June 30,		Dec 31,
($ in thousands)	2007		2006

Debt securities	$	472,606	$	456,148
Equity funds		2,104,814		1,861,762
Other		70,743		68,810
Total	$	2,648,163	$	2,386,720


Changes in Guaranteed Liability Balances:	As of
($ in thousands)	June 30, 2007
	Annuity		Annuity
	GMDB⁽¹⁾		GMIB

Liability balance as of January 1, 2007	$	26,979	$	3,568
Incurred		(1,552)		(997)
Paid		(892)		—
Liability balance as of June 30, 2007	$	24,535	$	2,571


Changes in Guaranteed Liability Balances:	Year Ended
($ in thousands)	December 31, 2006
	Annuity		Annuity
	GMDB⁽¹⁾		GMIB

Liability balance as of January 1, 2006	$	27,749	$	2,474
Incurred		601		1,094
Paid		(1,371)		—
Liability balance as of December 31, 2006	$	26,979	$	3,568

_______


⁽¹⁾	The reinsurance recoverable asset related to the GMDB was $15,193 thousand and $17,139 thousand as of June 30, 2007 and December 31, 2006, respectively.

The GMDB and GMIB guarantees are recorded in policy liabilities and accruals on our balance sheet. Changes in the liability are recorded in policy benefits on our statement of operations. In a manner consistent with our policy for deferred policy acquisition costs, we regularly evaluate estimates used and adjust the additional liability balances, with a related charge or credit to benefit expense if actual experience or other evidence suggests that earlier assumptions should be revised.

We also offer certain variable products with a guaranteed minimum withdrawal benefit, or GMWB, guaranteed minimum accumulation benefit, or GMAB, and a guaranteed pay-out annuity floor, or GPAF.

The GMWB guarantees the policyholder a minimum amount of withdrawals and benefit payments over time, regardless of the investment performance of the contract, subject to an annual limit. Optional resets are available. In addition, we introduced a feature for these contracts beginning in the fourth quarter of 2005 that allows the policyholder to receive the guaranteed annual withdrawal amount for as long as they are alive.

The GMAB rider provides the contract holder with a minimum accumulation of their purchase payments deposited within a specific time period, adjusted for withdrawals, after a specified amount of time determined at the time of issuance of the variable annuity contract.

The GPAF rider provides the policyholder with a minimum payment amount if the variable annuity payment falls below this amount on the payment calculation date.

The GMWB, GMAB and GPAF represent embedded derivatives in the variable annuity contracts that are required to be reported separately from the host variable annuity contract. They are carried at fair value and reported in policyholder deposit funds. The fair value of the GMWB, GMAB and GPAF obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. As markets change, mature and evolve and actual policyholder behavior emerges, management continually evaluates the appropriateness of its assumptions.

As of June 30, 2007 and December 31, 2006, the embedded derivative for GMWB, GMAB and GPAF was immaterial. There were no benefit payments made for the GMWB or GMAB during the three and six months ended June 30, 2007 or 2006. For annuities with GPAF, as the amount of the excess of the GPAF over the account value can fluctuate with equity markets on a daily basis, the ultimate amount to be paid, if any, is uncertain and could be significantly more or less than $32,515 thousand.

In order to minimize the volatility associated with the GMWB and GMAB liabilities, we have entered into a contract with Phoenix Life whereby we cede 100% of any claims for these guarantees. Because this contract does not transfer sufficient risk to be accounted for as reinsurance, we use deposit accounting for the contract. The assets on deposit with Phoenix Life were $1,109 thousand and $220 thousand at June 30, 2007 and December 31, 2006, respectively. These amounts are included in our balance sheet in other assets.

For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. For guarantees of benefits that are payable upon annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the policy holder determined in accordance with the terms of the contract in excess of the current account balance. For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance.


Additional Insurance Benefits:			Net Amount		Average
($ in thousands)	Account		At Risk After		Attained Age
	Value		Reinsurance		of Annuitant

GMDB return of premium⁽¹⁾	$	1,380,861	$	5,202		59
GMDB step up⁽²⁾		1,703,255		28,259		61
GMDB earnings enhancement benefit (EEB)⁽³⁾		80,581		—		59
GMDB greater of annual step up and roll up⁽⁴⁾		41,287		3,402		63
Total GMDB at June 30, 2007	$	3,205,984	$	36,863

GMIB	$	681,805				59
GMAB		296,186				55
GMWB		75,166				63
GPAF		32,515				74
Total at June 30, 2007	$	1,085,672

__________


⁽¹⁾	Return of premium: The death benefit is the greater of current account value or premiums paid (less any adjusted partial withdrawals).
⁽²⁾	Step Up: The death benefit is the greater of current account value, premiums paid (less any adjusted partial withdrawals) or the annual step up amount prior to the eldest original owner attaining a certain age. On and after the eldest original owner attains that age, the death benefit is the greater of current account value or the death benefit at the end of the contract year prior to the eldest original owner’s attaining that age plus premium payments (less any adjusted partial withdrawals) made since that date.
⁽³⁾	EEB: The death benefit is the greater of the premiums paid (less any adjusted partial withdrawals) or the current account value plus the EEB.
⁽⁴⁾	Greater of Annual Step Up and Annual Roll Up: The death benefit is the greater of premium payments (less any adjusted partial withdrawals), the annual step up amount, the annual roll up amount or the currant account value prior to the eldest original owner attaining age 81. On and after the eldest original owner attained age 81, the death benefit is the greater of current account value or the death benefit at the end of the contract year prior to the eldest original owner’s attained age of 81 plus premium payments (less any adjusted partial withdrawals) made since that date.

Liabilities for universal life are generally determined by estimating the expected value of losses when death benefits exceed revenues and recognizing those benefits ratably over the accumulation period based on total expected assessments. The assumptions used in estimating these liabilities are consistent with those used for amortizing deferred policy acquisition costs. A single set of best estimate assumptions is used since these insurance benefits do not vary significantly with capital markets volatility. At June 30, 2007, we held additional universal life benefit reserves of $15,524 thousand.

Income Taxes

For the three and six months ended June 30, 2007 and 2006, the effective income tax rates applicable to income from continuing operations differ from the 35.0% U.S. federal statutory tax rate. Items giving rise to the differences and the effects are as follows:


Analysis of Effective Income Tax Rates:	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2007	2006	2007	2006

Income taxes at statutory rate	35.0%	35.0%	35.0%	35.0%
Investment income not taxed	(2.8%)	(9.6%)	(2.6%)	(9.2%)
Effective income tax rates applicable to continuing operations	32.2%	25.4%	32.4%	25.8%

Our federal income tax returns are routinely audited by the IRS. The current periods being audited by the IRS are the 2002 through 2005 tax years. While it is often difficult to predict the outcome of these audits, including the timing of any resolution of any particular tax matter, we believe that our liabilities as recorded on the balance sheet pursuant to FIN 48 are adequate for all open tax years. Unfavorable resolution of any particular issue could result in additional use of cash to pay liabilities that would be deemed owed to the IRS. Additionally, any unfavorable or favorable resolution of any particular issue could result in an increase or decrease, respectively, to our effective income tax rate to the extent that our estimates differ from the ultimate resolution.

See Note 2 to these financial statements for information regarding the implementation of FIN 48.

Contingent Liabilities

Litigation and Arbitration

We are regularly involved in litigation and arbitration, both as a defendant and as a plaintiff. The litigation and arbitration naming us as a defendant ordinarily involves our activities as an insurer, investor, or taxpayer. It is not feasible to predict or determine the ultimate outcome of all legal or arbitration proceedings or to provide reasonable ranges of potential losses. We believe that the outcomes of our litigation and arbitration matters are not likely, either individually or in the aggregate, to have a material adverse effect on our consolidated financial condition. However, given the large or indeterminate amounts sought in certain of these matters and the inherent

unpredictability of litigation and arbitration, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our results of operations or cash flows in particular quarterly or annual periods.

Regulatory Matters

State regulatory bodies, the Securities and Exchange Commission, or SEC, the National Association of Securities Dealers, Inc., or NASD, and other regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with, among other things, insurance laws and securities laws. We endeavor to respond to such inquiries in an appropriate way and to take corrective action if warranted.

For example, during 2003 and 2004, the SEC conducted examinations of certain Phoenix Life variable products and certain Phoenix Life affiliated investment advisers and mutual funds. In 2004, the NASD also commenced examinations of two affiliated broker-dealers; the examinations were closed in April 2005 and November 2004, respectively.

In addition, Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by Phoenix Life and its subsidiaries with securities and other laws and regulations affecting their registered products. We endeavor to respond to such inquiries in an appropriate way and to take corrective action if warranted. There has been a significant increase in federal and state regulatory activity relating to financial services companies, with a number of recent regulatory inquiries focusing on late-trading, market timing and valuation issues. Our products entitle us to impose restrictions on transfers between separate account sub-accounts associated with our variable products.

In 2005 and 2004, the Boston District Office of the SEC conducted a compliance examination of certain of PNX’s affiliates that are registered under the Investment Company Act of 1940 or the Investment Advisers Act of 1940. Following the examination, the staff of the Boston District Office issued a deficiency letter primarily focused on perceived weaknesses in procedures for monitoring trading to prevent market timing activity. The staff requested PNX to conduct an analysis as to whether shareholders, policyholders and contract holders who invested in the funds that may have been affected by undetected market timing activity had suffered harm and to advise the staff whether PNX believes reimbursement is necessary or appropriate under the circumstances. A third party was retained to assist PNX in preparing the analysis. Based on this analysis, PNX advised the SEC that it does not believe that reimbursement is appropriate.

Over the past several years, a number of companies have announced settlements of enforcement actions with various regulatory agencies, primarily the SEC and the New York Attorney General’s Office. While no such action has been initiated against us, it is possible that one or more regulatory agencies may pursue this type of action against us in the future.

Financial services companies have also been the subject of broad industry inquiries by state regulators and attorneys general which do not appear to be company-specific. In this regard, in 2004, PNX received a subpoena from the Connecticut Attorney General’s office requesting information regarding certain distribution practices since 1998. Over 40 companies received such a subpoena. PNX cooperated fully and has had no further inquiry since filing its response.

These types of regulatory actions may be difficult to assess or quantify, may seek recovery of indeterminate amounts, including punitive and treble damages, and the nature and magnitude of their outcomes may remain unknown for substantial periods of time. While it is not feasible to predict or determine the ultimate outcome of all pending inquiries, investigations, legal proceedings and other regulatory actions, or to provide reasonable ranges of potential losses, we believe that their outcomes are not likely, either individually or in the aggregate, to have a material adverse effect on our consolidated financial condition. However, given the large or indeterminate amounts sought in certain of these actions and the inherent unpredictability of regulatory matters, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our results of operation or cash flows in particular quarterly or annual periods.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The discussion in this Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend for these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws relating to forward-looking statements. These include statements relating to trends in, or representing management’s beliefs about our future strategies, operations and financial results, as well as other statements including, but not limited to, words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “should” and other similar expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning trends and future developments and their potential effects on us. They are not guarantees of future performance. Actual results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties which include, among others: (i) movements in the equity markets and interest rates that affect our investment results, the fees we earn from our assets under management and the demand for our variable products; (ii) the possibility that mortality rates or persistency may differ significantly from our pricing expectations; (iii) the availability, pricing and adequacy of reinsurance coverage generally and the inability or unwillingness of our reinsurers to meet their obligations to us specifically; (iv) our dependence on non-affiliated distributors for our product sales; (v) downgrades in our financial strength ratings; (vi) our dependence on third parties to maintain critical business and administrative functions; (vii) our ability to attract and retain key personnel in a competitive environment; (viii) heightened competition, including with respect to pricing, entry of new competitors and the development of new products and services by new and existing competitors; (ix) legislative, regulatory, accounting or tax developments that may affect us directly, or indirectly through the cost of, or demand for, our products or services; (x) legal or regulatory actions; and (xi) other risks and uncertainties described herein or in any of our filings with the SEC. We undertake no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

MANAGEMENT’S NARRATIVE ANALYSIS OF THE

RESULTS OF OPERATIONS

This section reviews our results of operations for the three and six months ended June 30, 2007 and 2006. This discussion should be read in conjunction with the unaudited interim condensed financial statements and notes contained in this filing as well as in conjunction with our financial statements for the year ended December 31, 2006 in our 2006 Annual Report on Form 10-K.

Overview

For an overview of our current business and an explanation of the key drivers of our revenues, expenses and overall profitability, please see the “Overview” discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our 2006 Annual Report on Form 10-K.

Impact of New Accounting Standards

For a discussion of accounting standards, see Note 2 to our financial statements in this Form 10-Q.

Critical Accounting Estimates

The analysis of our results of operations is based upon our financial statements, which have been prepared in accordance with GAAP. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Critical accounting estimates are reflective of significant judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

See our 2006 Annual Report on Form 10-K for a description of our critical accounting estimates.

Results of Operations


Summary Financial Data:	Three Months Ended				Increase (decrease) and
($ in thousands)	June 30,				percentage change
	2007		2006		2007 vs. 2006
REVENUES:
Premiums	$	2,882	$	3,219	$	(337)	(10%)
Insurance and investment product fees		59,562		41,841		17,721	42%
Net investment income		27,192		33,906		(6,714)	(20%)
Net realized investment gains (losses)		359		(64)		423	661%
Total revenues		89,995		78,902		11,093	14%
BENEFITS AND EXPENSES:
Policy benefits		32,555		36,640		(4,085)	(11%)
Policy acquisition cost amortization		28,243		20,767		7,476	36%
Other operating expenses		20,423		16,263		4,160	26%
Total benefits and expenses		81,221		73,670		7,551	10%
Income before income taxes		8,774		5,232		3,542	68%
Applicable income tax expense		(2,829)		(1,329)		(1,500)	113%
Net income	$	5,945	$	3,903	$	2,042	52%

Three months ended June 30, 2007 compared to three months ended June 30, 2006

Net income increased primarily as a result of higher revenues resulting from an increase in insurance and investment product fees, net realized investment gains and lower policy benefits, partially offset by an increase in policy acquisition cost amortization and higher benefits and expenses.

Total revenues increased due to the following:


·		Insurance and investment product fees increased due primarily to higher universal life fees, primarily cost of insurance charges, resulting from higher sales and the growth of inforce business due to our expanded distribution. In addition, higher levels of funds on deposit and separate account values, driven by both higher annuity sales and favorable equity markets, resulted in an increase in asset-based fees.
·		Net realized investment gains exceeded losses due to higher gains on sales of other investments in 2007.

Offsetting these increases was a decrease in net investment income due to a lower average asset balance in 2007 resulting from the scheduled maturity in 2006 of a large annuity contract, and the run-off of certain discontinued annuity products.

Total benefits and expenses increased due to the following:


·		Policy acquisition cost amortization increased due to higher universal life margins, partially offset by lower annuity amortization. The lower annuity amortization was due to favorable market performance and the effects of a 2006 unlocking of the assumptions we use to project expected gross profits in the amortization schedules.
·		Other operating expenses, which include non-deferrable policy acquisition costs and general and administrative costs, increased due to higher incentive accruals resulting from improved company performance and higher technology and infrastructure expenses due to increased maintenance of our systems.

Partially offsetting these increases was a decrease in policy benefits:


·		Policy benefits decreased principally due to lower interest credited for annuities because of lower general account funds. This decrease was partially offset by higher interest credited for universal life policies, reflecting the growth in inforce business.

Applicable income tax expense increased due to higher net income before taxes.


Summary Financial Data:	Six Months Ended				Increase (decrease) and
($ in thousands)	June 30,				percentage change
	2007		2006		2007 vs. 2006
REVENUES:
Premiums	$	6,061	$	5,694	$	367	6%
Insurance and investment product fees		113,863		83,836		30,027	36%
Net investment income		55,086		68,966		(13,880)	(20%)
Net realized investment gains (losses)		189		(4,147)		4,336	105%
Total revenues		175,199		154,349		20,850	14%
BENEFITS AND EXPENSES:
Policy benefits		68,231		80,488		(12,257)	(15%)
Policy acquisition cost amortization		53,506		33,824		19,682	58%
Other operating expenses		37,509		35,775		1,734	5%
Total benefits and expenses		159,246		150,087		9,159	6%
Income before income taxes		15,953		4,262		11,691	274%
Applicable income tax expense		(5,169)		(1,101)		(4,068)	369%
Net income	$	10,784	$	3,161	$	7,623	241%

Six months ended June 30, 2007 compared to six months ended June 30, 2006

Net income increased primarily as a result of an increase in insurance and investment product fees, net realized investment gains and lower policy benefits, partially offset by higher policy acquisition cost amortization.

Total revenues increased due to the following:


·		Insurance and investment product fees increased due primarily to higher cost of insurance charges for universal life, resulting from higher sales and growth of inforce business due to our expanded distribution. In addition, higher levels of funds on deposit and separate account values, driven by both higher annuity sales and favorable equity markets, resulted in an increase in asset-based fees.
·		Net realized investment gains exceeded losses due to lower transaction losses on debt securities and higher gains on sales of other investments in 2007.

Total benefits and expenses increased due to the following:


·		Policy acquisition cost amortization increased due to higher universal life margins.
·		Other operating expenses, which include non-deferrable policy acquisition costs and general and administrative costs, increased due to higher incentive accruals resulting from improved company performance and higher technology and infrastructure expenses due to increased maintenance of our systems.

Partially offsetting these increases was a decrease in policy benefits due to lower interest credited, resulting from lower guaranteed interest funds on deposit for certain discontinued annuity products.

Applicable income tax expense increased due to higher net income before taxes.

General Account

The invested assets in our general account are generally of high quality and broadly diversified across fixed income sectors, public and private income securities and individual credits and issuers. Our investment professionals manage these general account assets in investment segments that support specific product liabilities. These investment segments have distinct investment policies that are structured to support the financial characteristics of the related liabilities within them. Segmentation of assets allows us to manage the risks and measure returns on capital for our various products.

Separate Accounts

Separate account assets are managed in accordance with the specific investment contracts and guidelines relating to our variable products. We generally do not bear any investment risk on assets held in separate accounts. Rather, we receive investment management fees based on assets under management. Assets held in separate accounts are not available to satisfy general account obligations.

Debt and Equity Securities Held in Our General Account

Our general account debt securities portfolios consist primarily of investment-grade publicly traded and privately placed corporate bonds, residential mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities. As of June 30, 2007, our general account held debt securities with a carrying value of $1,826.4 million, representing 98.9% of total general account investments. Public debt securities represented 80.4% of total debt securities, with the remaining 19.6% represented by private debt securities.


Debt Securities by Type and Credit Quality:	As of June 30, 2007
($ in thousands)	Investment Grade				Below Investment Grade
	Fair Value		Cost		Fair Value		Cost

United States government and agency	$	77,353	$	77,874	$	—	$	—
State and political subdivision		11,860		12,162		—		—
Foreign government		11,124		10,946		18,837		16,738
Corporate		897,281		914,922		121,086		125,304
Mortgage-backed		391,284		398,445		—		—
Other asset-backed		288,670		289,106		8,860		8,876
Total debt securities	$	1,677,572	$	1,703,455	$	148,783	$	150,918

Percentage of total debt securities		91.9%		91.9%		8.1%		8.1%

We manage credit risk through industry and issuer diversification. Maximum exposure to an issuer is defined by quality ratings, with higher quality issuers having larger exposure limits. Our investment approach emphasizes a high level of industry diversification. The top five industry holdings as of June 30, 2007 in our debt securities portfolio are diversified financial services (8.1%), banking (6.1%), insurance (3.1%), electric utilities (2.5%) and broker-dealers (2.4%).

The weakness in the U.S. real estate markets, increases in interest rates and the effects of relaxed underwriting standards for mortgages and home equity loans have led to higher delinquency rates for residential mortgage-backed securities, especially those originated in 2006 and those designated as sub-prime. In addition, there have been increased concerns in the financial markets about residential mortgage-backed securities designated as
Alt-A.

Sub-prime mortgage lending refers to the origination of residential mortgage loans to customers with weak or impaired credit profiles, including, but not limited to, those with the lowest credit scores. Alt-A mortgage lending refers to the origination of residential mortgage loans to customers who are rated above the sub-prime category but below top rated prime borrowers, for reasons including, but not limited to, the election not to provide documentation for items such as income sources.

Most of our residential mortgage-backed securities portfolio is highly rated. As of June 30, 2007, over 89% of the total residential portfolio was rated AAA or AA. We have $104,180 thousand of sub-prime exposure, which represents 5.4% of our general account. Substantially all of our sub-prime exposure is investment grade, and 94.9% is AAA rated, with another 1.8% in AA securities. We have employed a rigorous and disciplined approach in the analysis and monitoring of our mortgage-backed securities. We have been focused on identifying those securities that can withstand significant increases in delinquencies and foreclosures in the underlying mortgage pools before incurring a loss of principal. Our exposure to sub-prime mortgages originated after 2005 is less than 3% of our general account.

The following tables represent our total exposure to residential mortgage-backed securities by credit quality as of June 30, 2007:


	Market		% General
($ in thousands)	Value		Account		AAA	AA		A		BAA		BA		B
Agency	$	64,527		3.4%	100.0%		0.0%		0.0%		0.0%		0.0%		0.0%
Prime		188,743		9.9%	81.2%		0.9%		5.0%		12.9%		0.0%		0.0%
Alt-A		58,504		3.1%	88.9%		0.7%		9.7%		0.7%		0.0%		0.0%
Sub-prime		104,180		5.4%	94.9%		1.8%		1.3%		1.6%		0.3%		0.1%
Total	$	415,954		21.8%	88.6%		1.0%		3.9%		6.4%		0.1%		0.0%


	Book		% General
($ in thousands)	Value		Account		AAA	AA		A		BAA		BA		B
Agency	$	66,457		N/A	100.0%		0.0%		0.0%		0.0%		0.0%		0.0%
Prime		193,685		N/A	80.9%		0.8%		5.5%		12.8%		0.0%		0.0%
Alt-A		59,338		N/A	88.8%		0.8%		9.6%		0.8%		0.0%		0.0%
Sub-prime		105,083		N/A	95.1%		1.8%		1.2%		1.5%		0.3%		0.1%
Total	$	424,563		N/A	88.6%		0.9%		4.1%		6.3%		0.1%		0.0%

The following table presents certain information with respect to our gross unrealized losses related to our investments in general account debt securities. Applicable deferred acquisition costs and deferred income taxes reduce the effect of these losses on our comprehensive income.


Duration of Gross Unrealized Losses	As of June 30, 2007
on General Account Securities:			0 – 6		6 – 12		Over 12
($ in thousands)	Total		Months		Months		Months

Debt securities
Total fair value	$	1,395,963	$	376,747	$	50,255	$	968,961
Total amortized cost		1,434,517		383,184		51,258		1,000,075
Unrealized losses	$	(38,554)	$	(6,437)	$	(1,003)	$	(31,114)
Unrealized losses after offsets	$	(6,480)	$	(1,047)	$	(156)	$	(5,277)
Unrealized losses over 20% of cost	$	—	$	—	$	—	$	—
Unrealized losses over 20% of cost after offsets	$	—	$	—	$	—	$	—

Investment grade:
Unrealized losses	$	(33,749)	$	(6,218)	$	(983)	$	(26,548)
Unrealized losses after offsets	$	(5,671)	$	(1,013)	$	(153)	$	(4,505)
Unrealized losses over 20% of cost	$	—	$	—	$	—	$	—
Unrealized losses over 20% of cost after offsets	$	—	$	—	$	—	$	—

Below investment grade:
Unrealized losses	$	(4,805)	$	(219)	$	(20)	$	(4,566)
Unrealized losses after offsets	$	(809)	$	(34)	$	(3)	$	(772)
Unrealized losses over 20% of cost	$	—	$	—	$	—	$	—
Unrealized losses over 20% of cost after offsets	$	—	$	—	$	—	$	—

Total net unrealized losses on debt securities were $28,018 thousand (unrealized losses of $38,554 thousand less unrealized gains of $10,536 thousand).

For debt securities with gross unrealized losses, 87.5% of the unrealized losses after offsets pertain to investment grade securities and 12.5% of the unrealized losses after offsets pertain to below investment grade securities at June 30, 2007.

At the end of each reporting period, we review all securities for potential recognition of an other-than-temporary impairment. We maintain a watch list of securities in default, near default or otherwise considered by our investment professionals as being distressed, potentially distressed or requiring a heightened level of scrutiny. We also identify securities whose carrying value has been below amortized cost on a continuous basis for zero to six months, greater than six months to 12 months and greater than 12 months. This analysis is provided for investment grade and non-investment grade securities and closed block and outside of closed block securities. Using this analysis, coupled with our watch list, we review all securities whose fair value is less than 80% of amortized cost (significant unrealized loss) with emphasis on below investment grade securities with a continuous significant unrealized loss in excess of six months. In addition, we review securities that had experienced lesser percentage declines in value on a more selective basis to determine if a security is other-than-temporarily impaired.

In determining that the securities giving rise to unrealized losses were not other-than-temporarily impaired, we considered many factors, including those cited previously. In making these evaluations, we must exercise considerable judgment. Accordingly, there can be no assurance that actual results will not differ from our judgments and that such differences may require the future recognition of other-than-temporary impairment charges that could have a material effect on our financial position and results of operations. In addition, the value of, and the realization of any loss on, a debt security or equity security is subject to numerous risks, including interest rate risk, market risk, credit risk and liquidity risk. The magnitude of any loss incurred by us may be affected by the relative concentration of our investments in any one issuer or industry. We have established specific policies limiting the concentration of our investments in any single issuer and industry and believe our investment portfolio is prudently diversified.

Liquidity and Capital Resources

In the normal course of business, we enter into transactions involving various types of financial instruments such as debt and equity securities. These instruments have credit risk and also may be subject to risk of loss due to interest rate and market fluctuations.

Our liquidity requirements principally relate to the liabilities associated with various life insurance and annuity products and operating expenses. Liabilities arising from life insurance and annuity products include the payment of benefits, as well as cash payments in connection with policy surrenders, withdrawals and loans.

Historically, we have used cash flow from operations and investment activities to fund liquidity requirements. Our principal cash inflows from life insurance and annuities activities come from premiums, annuity deposits and charges on insurance policies and annuity contracts. Principal cash inflows from investment activities result from repayments of principal, proceeds from maturities, sales of invested assets and investment income.

Ratings

Rating agencies assign financial strength ratings to Phoenix Life and its subsidiaries based on their opinions of the Companies’ ability to meet their financial obligations. Ratings changes may result in increased or decreased interest costs in connection with future borrowings. Such an increase or decrease would affect our earnings and could affect our ability to finance our future growth. Downgrades may also trigger defaults or repurchase obligations. The financial strength ratings as of June 30, 2007 were as follows:


		Financial Strength Ratings of
Rating Agency		Phoenix Life and PHL Variable Life

A.M. Best Company, Inc.		A (“Excellent”)

Fitch		A+ (“Strong”)

Standard & Poor’s		A- (“Strong”)

Moody’s		A3 (“Good”)

On March 15, 2007, Standard & Poor’s lowered its financial strength ratings on The Phoenix Companies, Inc.’s life insurance subsidiaries, including Phoenix Life and the Company, to A- from A, while assigning a stable outlook to all of these companies.

These ratings are not a recommendation to buy or hold any of our securities.

See our 2006 Annual Report on Form 10-K for additional information as to liquidity and capital resources.

Contractual Obligations and Commercial Commitments

As of June 30, 2007, there were no significant changes to our outstanding contractual obligations and commercial commitments as disclosed in our 2006 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

As of June 30, 2007 and December 31, 2006, we did not have any significant off-balance sheet arrangements as defined by Item 303(a)(4)(ii) of SEC Regulation S-K.

Reinsurance

We maintain life reinsurance programs designed to protect against large or unusual losses in our life insurance business. Based on our review of their financial statements, reputations in the reinsurance marketplace and other relevant information, we believe that we have no material exposure to uncollectible life reinsurance.

Risk Based Capital

At June 30, 2007, our estimated Total Adjusted Capital level was in excess of 400% of Company Action Level.

Statutory Capital and Surplus

Our statutory basis capital and surplus (including AVR) was $218,068 thousand and $234,662 thousand at June 30, 2007 and December 31, 2006, respectively. The decrease resulted from net losses on a statutory basis, partially offset by a capital contribution from PM Holdings.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have omitted this information from this report as we meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form with the reduced disclosure format permitted by that General Instruction.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, these officers have concluded that, as of June 30, 2007, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

During the three months ended on June 30, 2007, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are regularly involved in litigation and arbitration, both as a defendant and as a plaintiff. In addition, various regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, laws governing the activities of broker-dealers and other laws and regulations affecting our registered products. It is not feasible to predict or determine the ultimate outcome of all legal or regulatory proceedings or to provide reasonable ranges of potential losses. We believe that the outcomes of our litigation and regulatory matters are not likely, either individually or in the aggregate, to have a material adverse effect on our consolidated financial condition. However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation and regulatory matters, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our results of operations or cash flows in particular quarterly or annual periods. See Item 1A, “Risk Factors” and Note 7 to our financial statements in this Form 10-Q for additional information.

ITEM 1A. RISK FACTORS

There are no material changes to our Risk Factors as described in our 2006 Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5. OTHER INFORMATION


(a)		None.

(b)		No material changes.

ITEM 6. EXHIBITS


Exhibit

3.1		Form of Amended and Restated Certificate of Incorporation (as amended and restated effective May 31, 1994) (incorporated herein by reference to Exhibit 3.1 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)

3.2		Bylaws of PHL Variable Life Insurance Company (as amended and restated effective May 16, 2002) (incorporated herein by reference to Exhibit 3.2 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)

10.1		Services Agreement effective as of January 1, 1995 by and among PHL Variable Insurance Company, Phoenix Life Insurance Company, American Life and Reassurance Company, Phoenix American Life Insurance Company and Phoenix Home Life Mutual Insurance Company (incorporated herein by reference to Exhibit 10.1 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)

10.2		Investment Management Agreement effective as of January 1, 1995 by and between PHL Variable Insurance Company and Phoenix Investment Counsel, Inc. (incorporated herein by reference to Exhibit 10.2 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)

10.3		Amendment #1 (effective as of January 1, 1998) to the Investment Management Agreement dated as of January 1, 1995 by and between PHL Variable Insurance Company and Phoenix Investment Counsel, Inc. (incorporated herein by reference to Exhibit 10.3 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)

10.4		Amended and Restated Tax Allocation Agreement dated as of January 1, 2001 by and among The Phoenix Companies, Inc. and most of its subsidiaries (incorporated herein by reference to Exhibit 10.4 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)

10.5		Amendment #1 (effective as of January 1, 2006) to the Amended and Restated Tax Allocation Agreement dated as of January 1, 2001 by and among The Phoenix Companies, Inc. and most of its subsidiaries (incorporated herein by reference to Exhibit 10.5 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)

31.1		Certification of Philip K. Polkinghorn, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Certification of Michael E. Haylon, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32		Certification by Philip K. Polkinghorn, Chief Executive Officer and Michael E. Haylon, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*


*		Filed herewith

We will furnish any exhibit upon the payment of a reasonable fee, which fee shall be limited to our reasonable expenses in furnishing such exhibit. Requests for copies should be directed to: Corporate Secretary, PHL Variable Insurance Company, One American Row, P.O. Box 5056, Hartford, Connecticut 06102-5056.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			PHL VARIABLE INSURANCE COMPANY

Date:	August 10, 2007	By:		/s/ Michael E. Haylon
			Michael E. Haylon, Executive Vice President
			and Chief Financial Officer